Company Quick10K Filing
Quick10K
Modern Media Acquisition
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$10.44 26 $270
10-Q 2019-06-30 Quarter: 2019-06-30
10-K 2019-03-31 Annual: 2019-03-31
10-Q 2018-12-31 Quarter: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-K 2018-03-31 Annual: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-K 2017-03-31 Annual: 2017-03-31
8-K 2019-07-29 Enter Agreement, Exhibits
8-K 2019-06-14 Enter Agreement, Shareholder Rights, Amend Bylaw, Shareholder Vote, Regulation FD, Exhibits
8-K 2019-06-12 Other Events
8-K 2019-06-07 Other Events, Exhibits
8-K 2019-05-08 Other Events
8-K 2019-02-12 Other Events
8-K 2019-02-08 Enter Agreement, Shareholder Rights, Amend Bylaw, Shareholder Vote, Regulation FD, Other Events, Exhibits
8-K 2019-02-04 Other Events
8-K 2019-01-24 Enter Agreement, Regulation FD, Other Events, Exhibits
8-K 2019-01-24 Enter Agreement, Regulation FD, Other Events, Exhibits
8-K 2019-01-08 Other Events
8-K 2018-11-01 Regulation FD
TRIP Tripadvisor 6,790
RHP Ryman Hospitality Properties 4,310
URBN Urban Outfitters 2,940
FBMS First Bancshares 535
ADRO Aduro Biotech 267
TIPT Tiptree 203
MMTRS Mills Music Trust 0
HCT Healthcare Trust 0
BREIT Blackstone Real Estate Income Trust 0
DWCH Datawatch 0
MMDM 2019-06-30
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 d787391dex311.htm
EX-31.2 d787391dex312.htm
EX-32.1 d787391dex321.htm
EX-32.2 d787391dex322.htm

Modern Media Acquisition Earnings 2019-06-30

MMDM 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 d787391d10q.htm FORM 10-Q Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File No. 001-38092

 

 

MODERN MEDIA ACQUISITION CORP.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   47-1277598

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

3414 Peachtree Road, Suite 480

Atlanta, GA

  30326
(Address of Principal Executive Offices)   (Zip Code)

(404) 443-1182

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Units, each consisting of one share of common stock, one right and one-half of one warrant   MMDMU   Nasdaq Capital Market
Common stock, par value $0.0001 per share   MMDM   Nasdaq Capital Market
Rights, each exchangeable into one-tenth of one share of common stock   MMDMR   Nasdaq Capital Market
Warrants, each whole warrant exercisable for one share of common stock at an exercise price of $11.50 per share   MMDMW   Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):    Yes  ☒    No  ☐

As of August 9, 2019, there were 6,581,665 shares of the registrant’s common stock, $.0001 par value per share, outstanding.

 

 

 

 


Table of Contents

TABLE OF CONTENTS

 

         Page  

PART 1—FINANCIAL INFORMATION

 

Item 1.

  Financial Statements   
  Condensed Balance Sheets as of June 30, 2019 (unaudited) and March 31, 2019      2  
  Condensed Statements of Operations for the Three Months Ended June 30, 2019 and 2018 (unaudited)      3  
  Condensed Statements of Changes in Stockholders’ Equity for the Three Months Ended June 30, 2019 and 2018 (unaudited)      4  
  Condensed Statements of Cash Flows for the Three Months Ended June 30, 2019 and 2018 (unaudited)      5  
  Notes to Condensed Financial Statements (unaudited)      6  

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      16  

Item 3.

  Quantitative and Qualitative Disclosures about Market Risk      20  

Item 4.

  Controls and Procedures      20  

PART II— OTHER INFORMATION

 

Item 1.

  Legal Proceedings      21  

Item 1A.

  Risk Factors      21  

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      21  

Item 3.

  Defaults Upon Senior Securities      21  

Item 4.

  Mine Safety Disclosures      21  

Item 5.

  Other Information      21  

Item 6.

  Exhibits      21  

SIGNATURES

     22  


Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MODERN MEDIA ACQUISITION CORP.

CONDENSED BALANCE SHEETS

 

     June 30,
2019
     March 31,
2019
 
     (Unaudited)      (Audited)  

ASSETS

     

Current Assets

     

Cash

   $ 9,241      $ 115,529  

Prepaid expenses and other current assets

     61,642        41,250  
  

 

 

    

 

 

 

Total Current Assets

     70,883        156,779  

Investment securities held in Trust Account

     14,525,384        152,420,927  
  

 

 

    

 

 

 

Total Assets

   $ 14,596,267      $ 152,577,706  
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current Liabilities

     

Accounts payable and accrued expenses

   $ 2,224,805      $ 1,911,055  

Income taxes payable

     245,421        59,223  

Working capital loan

     30,000        —    

Promissory note – related party

     1,965,675        491,419  
  

 

 

    

 

 

 

Total Current Liabilities

     4,465,901        2,461,697  

Deferred underwriting fees

     4,785,000        7,785,000  

Deferred legal fees payable

     300,000        300,000  
  

 

 

    

 

 

 

Total Liabilities

     9,550,901        10,546,697  
  

 

 

    

 

 

 

Commitments and Contingencies (see note 3)

     

Common stock subject to possible redemption, $0.0001 par value; 4,433 and 13,522,841 shares at redemption value of approximately $10.23 as of June 30, 2019 and 10.13 as of March 31, 2019, respectively

     45,364        137,031,005  

Stockholders’ Equity

     

Preferred stock, $0.0001 par value; 10,000,000 shares authorized, none issued or outstanding as of June 30, 2019 or March 31, 2019

     —          —    

Common stock, $0.0001 par value; 100,000,000 shares authorized; 6,577,232 and 6,409,478 shares issued and outstanding (excluding 4,433 and 13,522,841 shares subject to possible redemption) as of June 30, 2019 and March 31, 2019, respectively

     658        641  

Additional paid-in capital

     3,728,523        3,901,718  

Retained earnings

     1,270,821        1,097,645  
  

 

 

    

 

 

 

Total Stockholders’ Equity

     5,000,002        5,000,004  
  

 

 

    

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 14,596,267      $ 152,577,706  
  

 

 

    

 

 

 

The accompanying notes are an integral part of the unaudited condensed financial statements.

 

2


Table of Contents

MODERN MEDIA ACQUISITION CORP.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

     Three Months Ended
June 30,
 
     2019     2018  

Operating costs

   $ 510,846     $ 164,711  
  

 

 

   

 

 

 

Loss from operations

     (510,846     (164,711
  

 

 

   

 

 

 

Interest income

     870,220       802,262  
  

 

 

   

 

 

 

Income before provision for income taxes

     359,374       637,551  

Provision for income taxes

     (186,198     (158,054
  

 

 

   

 

 

 

Net Income

   $ 173,176     $ 479,497  
  

 

 

   

 

 

 

Weighted average common shares outstanding:

    

Basic

     6,411,321       6,321,481  
  

 

 

   

 

 

 

Diluted

     17,584,951       25,875,000  
  

 

 

   

 

 

 

Basic and diluted net income per common share:

    

Basic

   $ 0.03     $ 0.08  
  

 

 

   

 

 

 

Diluted

   $ 0.01     $ 0.02  
  

 

 

   

 

 

 

The accompanying notes are an integral part of the unaudited condensed financial statements.

 

3


Table of Contents

MODERN MEDIA ACQUISITION CORP.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

THREE MONTHS ENDED JUNE 30, 2019

 

     Common Stock     

Additional

Paid-in

    Retained     

Total

Stockholders’

 
     Shares      Amount      Capital     Earnings      Equity  

Balance – April 1, 2019

     6,409,478      $ 641      $ 3,901,718     $ 1,097,645      $ 5,000,004  

Change in value of common stock subject to possible redemption

     167,754        17        (3,173,195     —          (3,173,178

Waiver of deferred underwriting fee

     —          —          3,000,000       —          3,000,000  

Net income

     —          —          —         173,176        173,176  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Balance – June 30, 2019

     6,577,232      $ 658      $ 3,728,523     $ 1,270,821      $ 5,000,002  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

THREE MONTHS ENDED JUNE 30, 2018

 

     Common Stock    

Additional

Paid-in

    Retained     

Total

Stockholders’

 
     Shares     Amount     Capital     Earnings      Equity  

Balance – April 1, 2018

     6,322,003     $ 632     $ 4,549,828     $ 449,545      $ 5,000,005  

Change in value of common stock subject to possible redemption

     (47,475     (5     (479,493     —          (479,498

Net income

     —         —         —         479,497        479,497  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance – June 30, 2018

     6,274,528     $ 627     $ 4,070,335     $ 929,042      $ 5,000,004  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

The accompanying notes are an integral part of the unaudited condensed financial statements.

 

4


Table of Contents

MODERN MEDIA ACQUISITION CORP.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Three Months Ended June 30,  
     2019     2018  

Cash Flows from Operating Activities:

    

Net income

   $ 173,176     $ 479,497  

Adjustments to reconcile net income to net cash used in operating activities:

    

Interest earned on marketable securities held in Trust Account

     (870,220     (802,262

Changes in operating assets and liabilities:

    

Prepaid expenses and other current assets

     (20,392     (32,085

Account payable and accrued expenses

     313,750       29,008  

Income taxes payable

     186,198       158,054  
  

 

 

   

 

 

 

Net cash used in operating activities

     (217,488     (167,788
  

 

 

   

 

 

 

Cash Flows from Investing Activities:

    

Cash withdrawn from Trust Account

     140,158,819       —    

Interest income released from Trust Account to pay taxes

     81,200       50,624  
  

 

 

   

 

 

 

Net cash provided by investing activities

     140,240,019       50,624  
  

 

 

   

 

 

 

Cash Flows from Financing Activities:

    

Redemption of common stock

     (140,158,819     —    

Proceeds from advance from related party

     30,000       —    
  

 

 

   

 

 

 

Net cash used in financing activities

     (140,128,819     —    
  

 

 

   

 

 

 

Net Change in Cash

     (106,288     (117,164

Cash – Beginning

     115,529       558,398  
  

 

 

   

 

 

 

Cash – Ending

   $ 9,241     $ 441,234  
  

 

 

   

 

 

 

Non-Cash Investing and Financing Activities:

    

Change in value of common stock subject to possible redemption

   $ 137,076,369     $ 479,498  
  

 

 

   

 

 

 

Waiver of a portion of deferred underwriting fee

   $ 3,000,000     $ —    
  

 

 

   

 

 

 

Contribution to Trust Account by Sponsor

   $ 1,474,256     $ —    
  

 

 

   

 

 

 

The accompanying notes are an integral part of the unaudited condensed financial statements.

 

5


Table of Contents

MODERN MEDIA ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

Modern Media Acquisition Corp. (the “Company,” “we,” “us” or “our”) was initially formed as a Delaware limited liability company on June 9, 2014 under the name of M Acquisition Company I LLC. On January 3, 2017, the Company converted from a limited liability company to a Delaware C Corporation and changed its name to Modern Media Acquisition Corp. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, recapitalization or similar business combination with one or more businesses (a “Business Combination”). The Company has neither engaged in any operations nor generated significant revenue to date.

All activity through June 30, 2019 relates to the Company’s formation, its initial public offering (“Initial Public Offering”), which is described below, its search for a Business Combination and activities in connection with the proposed business combination with Akazoo Limited, a private company incorporated under the laws of Scotland (“Akazoo”) (see Note 6).

The registration statement for the Company’s Initial Public Offering was declared effective on May 11, 2017. On May 17, 2017 (the “Closing Date”), the Company completed its Initial Public Offering of 20,700,000 units (“Units” and, with respect to the common stock included in the Units, the “Public Shares”), which included the full exercise by the underwriters of their over-allotment option in the amount of 2,700,000 Units at $10.00 per Unit, generating gross proceeds of $207,000,000. The Units are described in Note 3.

Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 7,320,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per warrant in a private placement to the Company’s sponsor, Modern Media Sponsor LLC (the “Sponsor”), generating gross proceeds of $7,320,000, which is described in Note 4.

Transaction costs amounted to $12,309,271, consisting of $3,600,000 of underwriting fees, $7,785,000 of deferred underwriting fees payable (which are held in the Trust Account (as defined below)) and $924,271 of other costs.

Following the closing of the Initial Public Offering, $209,070,000 ($10.10 per Unit) of the net proceeds from the sale of the Units and the Private Placement Warrants was placed in a trust account (the “Trust Account”) and has been invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less, or in an open-ended investment company that holds itself out as a money market fund meeting certain conditions under Rule 2a-7 of the Investment Company Act, and will remain in the Trust Account until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the Trust Account, as described below.

The Company’s management has broad discretion with respect to the specific application of the net proceeds from the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward completing a Business Combination. Nasdaq Capital Market (“NASDAQ”) rules provide that the Company’s initial Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (excluding any deferred underwriting commissions and taxes payable on interest earned on the funds held in the Trust Account) at the time of signing a definitive agreement in connection with a Business Combination. However, the Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.

The Company will provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. Except as discussed below, the stockholders will be entitled to redeem their Public Shares at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the completion of the Company’s Business Combination, including interest earned on the Trust Account deposits (which interest shall be net of taxes payable), divided by the number of then-outstanding Public Shares. The per-share amount to be distributed to stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). The Company may proceed with a Business Combination if, upon the completion of such Business Combination, the Company would have net tangible assets of at least $5,000,001, the Company’s Sponsor consents to such Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination. However, a greater net tangible asset or cash requirement may be contained in the agreement relating to the Company’s Business Combination. If a stockholder vote is not required by law or stock exchange listing requirement and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its second amended and restated certificate of incorporation (the “Charter”), undertake a redemption offer pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents with the SEC prior to completing a

 

 

6


Table of Contents

MODERN MEDIA ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Business Combination. If, however, stockholder approval of the transaction is required by law or stock exchange listing requirement, or the Company decides to obtain stockholder approval for business or other legal reasons, the Company will offer to redeem the Public Shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules and will file proxy materials with the SEC. If the Company seeks stockholder approval in connection with a Business Combination, the holders of the Founder Shares (the “Initial Stockholders”) have agreed to vote their Founder Shares and any Public Shares held by them in favor of a Business Combination.

The Initial Stockholders have agreed to waive their redemption rights with respect to their Founder Shares and any Public Shares they may acquire (i) in connection with the completion of a Business Combination, (ii) in connection with a stockholder vote to amend the Company’s Charter to modify the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if it does not complete a Business Combination within the Combination Deadline (as defined below), and (with respect to their Founder Shares only), (iii) if the Company fails to complete a Business Combination within the Combination Period and (iv) upon the Company’s liquidation (although the Initial Stockholders will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares they hold if the Company fails to complete a Business Combination within the Combination Deadline).

Notwithstanding the foregoing redemption rights, if the Company seeks stockholder approval of its Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Charter provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its Public Shares with respect to an aggregate of 20.0% or more of the shares sold in the Initial Public Offering without the Company’s consent. However, there will be no restriction on the Company’s stockholders’ ability to vote all of their Public Shares for or against a Business Combination.

Under the Company’s Charter, the Company had until November 17, 2018 (the “Initial Date”) to complete a Business Combination, or February 17, 2019 if the Company executed a letter of intent, agreement in principle or definitive agreement for a Business Combination by the Initial Date but had not completed a Business Combination by such date (the “Combination Period”). Effective October 31, 2018, the Company signed a non-binding letter of intent for a potential Business Combination. As a result, the Company had until February 17, 2019 to consummate a Business Combination. On February 8, 2019, the Company held a meeting of the stockholders of the Company at which the stockholders approved, among other things, a proposal to amend (the “First Charter Amendment”) the Company’s Charter (the “Charter”) to extend the deadline to complete a Business Combination from February 17, 2019 to June 17, 2019 (see Note 5). In connection with the approval of the First Charter Amendment, and pursuant to the terms of the Charter, stockholders elected to redeem an aggregate of 5,942,681 shares of the Company’s Common Stock. Following the completion of such redemptions, the Company had 19,932,319 shares of common stock issued and outstanding.

On June 14, 2019, the Company held a meeting of the stockholders of the Company at which the stockholders approved, among other things, a proposal to amend (the “Second Charter Amendment”) the Company’s Charter to extend the deadline to complete a Business Combination from June 17, 2019 to September 17, 2019 (the “Combination Deadline”). In connection with approval of the Second Charter Amendment, stockholders elected to redeem an aggregate of 13,350,654 shares of the Company’s Common Stock. Giving effect to the completion of such redemptions (which were paid on July 1, 2019), as of June 30, 2019, the Company had approximately $14.5 million in cash remaining in the Trust Account and 6,581,665 shares of common stock issued and outstanding.

If the Company does not consummate the pending transaction with Akazoo, or any other Business Combination, on or before the Combination Deadline, and that date is not otherwise extended by the Company’s stockholders, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, and subject to having lawfully available funds therefor, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the Trust Account deposits (which interest shall be net of taxes payable and less up to $50,000 to pay dissolution expenses), divided by the number of then-outstanding Public Shares, which redemption will completely extinguish the Company’s public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

The underwriters have agreed to waive their rights to their deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination by the Combination Deadline and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution (including Trust Account assets) will be only $10.23 at June 30, 2019 per share. In order to protect the amounts held in the Trust Account, the Company has entered into an agreement with the Sponsor (the “Indemnifier”), pursuant to which the Indemnifier has agreed to be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold

 

7


Table of Contents

MODERN MEDIA ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

to the Company, or a prospective target business with which the Company has discussed entering into a Business Combination, reduce the amount of funds in the Trust Account below a specified threshold. This liability does not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of its Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933 (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Indemnifier will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Indemnifier will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

Going Concern

As of June 30, 2019, the Company had approximately $9,000 in its operating bank account, approximately $131,000 of interest available to pay franchise and income taxes (less up to $50,000 of interest to pay dissolution expenses) and a working capital deficit of approximately $4,395,000.

If the Company’s estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to a Business Combination. Moreover, the Company may need to obtain additional financing either to complete a Business Combination or because it becomes obligated to redeem a significant number of its public shares upon completion of a Business Combination, in which case the Company may issue additional securities or incur debt in connection with such Business Combination.

In order to finance transaction costs in connection with a Business Combination, (i) the Sponsor has committed to loan the Company up to an aggregate of $500,000, to be provided in the event that funds held outside of the Trust Account are insufficient to fund the Company’s expenses relating to investigating and selecting a target business and other working capital requirements prior to a Business Combination and (ii) the Sponsor, one or more affiliates of the Sponsor or certain of the Company’s officers or directors may, but are not obligated to, loan the Company any additional funds as may be required. If the Company completes a Business Combination, the Company would repay such loaned amounts. In the event that a Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay any such loaned amounts but no proceeds from the Trust Account would be used for such repayment. Up to $1,000,000 of such loans may be convertible into working capital loan warrants of the post business combination entity at a price of $1.00 per warrant at the option of the lender. The working capital loan warrants will be identical to the Private Placement Warrants issued to the Sponsor. Other than as set forth above, the terms of such loans by the Sponsor, an affiliate of the Sponsor or certain of the Company’s officers or directors, if any, have not been determined and no written agreements exist with respect to such loans. The Company does not expect to seek loans from parties other than the Sponsor, an affiliate of the Sponsor or certain of the Company’s officers or directors, if any, as the Company does not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in the Trust Account. As of June 30, 2019, there was $30,000 of borrowings outstanding under the working capital loans.

If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, suspending the pursuit of a potential transaction. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through September 17, 2019, the scheduled liquidation date of the Company. These condensed financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting only of adjustments of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

 

8


Table of Contents

MODERN MEDIA ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended March 31, 2019 as filed with the SEC on June 28, 2019, which contains the Company’s audited financial statements and notes thereto. The financial information as of March 31, 2019 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for the year ended March 31, 2019. The interim results for the three months ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending March 31, 2020 or for any future interim periods.

Emerging growth company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.

Cash and cash equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of June 30, 2019 and March 31, 2019.

Investments held in Trust Account

At June 30, 2019 and March 31, 2019, the assets held in the Trust Account were held in investments.

Common stock subject to possible redemption

The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at June and 30, 2019 and March 31, 2019, 4,433 and 13,522,841, respectively, shares of common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.

 

9


Table of Contents

MODERN MEDIA ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Offering costs

Offering costs consist principally of legal, accounting, underwriting fees and other costs incurred that are directly related to the Initial Public Offering. Offering costs of $12,309,271 were charged to stockholders’ equity upon the completion of the Initial Public Offering.

Income taxes

The Company complies with the accounting and reporting requirements of ASC Topic 740 “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. As of June 30, 2019 and March 31, 2019, the Company had a deferred tax asset of approximately $738,000 and $631,000, respectively, which had a full valuation allowance recorded against it of approximately $738,000 and $631,000, respectively.

The Company’s currently taxable income primarily consists of interest income on the Trust Account. The Company’s general and administrative costs are generally considered start-up costs and are not currently deductible. During the three months ended June 30, 2019 and 2018, the Company recorded income tax expense of approximately $186,000 and $158,000, respectively, primarily related to interest income earned on the Trust Account. The Company’s effective tax rate for the three months ended June 30, 2019 and 2018 was approximately 52% and 25%, respectively, which differs from the expected income tax rate due to the start-up costs (discussed above) which are not currently deductible.

ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest or penalties as of June 30, 2019 or March 31, 2019. The Company is not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

The Company may be subject to potential examination by federal, state and city taxing authorities in the area of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal, state and city tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

Net income per common share

Net income per common share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Shares of common stock subject to possible redemption at June 30, 2019 and 2018 have been excluded from the calculation of basic income per share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. The Company has not considered the effect of (1) warrants sold in the Initial Public Offering and private placement to purchase 17,670,000 shares of common stock and (2) rights sold in the Initial Public Offering that are convertible into 2,070,000 shares of common stock, in the calculation of diluted income per share, since the exercise of the warrants and the conversion of the rights into shares of common stock is contingent upon the occurrence of future events. Diluted net income per share for three months ended June 30, 2019 and 2018 includes the impact of 17,584,951 and 25,875,000 shares of common stock, respectively.

Concentration of credit risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which at times may exceed the Federal depository insurance coverage of $250,000. At June 30, 2019 and 2018, the Company had not experienced losses on this account, and management believes the Company is not exposed to significant risks on such account.

Fair value of financial instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.

Recently issued accounting standards

Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s condensed financial statements.

 

10


Table of Contents

MODERN MEDIA ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

3. INITIAL PUBLIC OFFERING

Pursuant to the Initial Public Offering, the Company sold 20,700,000 Units at a purchase price of $10.00 per Unit, which included the full exercise by the underwriters of their over-allotment option in the amount of 2,700,000 Units. Each Unit consists of one share of the Company’s common stock, one right (“Public Right”) and one-half of one warrant (“Public Warrant”). Each Public Right will convert into one-tenth (1/10) of one share of common stock upon consummation of a Business Combination. Each whole Public Warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per share, subject to adjustment (see Note 7).

4. PRIVATE PLACEMENT

Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased 7,320,000 Private Placement Warrants at $1.00 per warrant (for an aggregate purchase price of $7,320,000). Each Private Placement Warrant is exercisable to purchase one share of the Company’s common stock at $11.50 per share. The proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. There are no redemption rights or liquidating distributions from the Trust Account with respect to the Private Placement Warrants. If the Company does not complete a Business Combination by the Combination Deadline, the proceeds of the sale of the Private Placement Warrants will be used to fund the required redemption of the Company’s Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.

5. RELATED PARTY TRANSACTIONS

Founder Shares

In June 2014, the Company was formed by MIHI LLC (“MIHI”), at which point MIHI paid an aggregate purchase price of $25,000, or approximately $250.00 per share, for its ownership interest in the Company. Prior to this initial investment, the Company had no assets, tangible or intangible. In January 2017, MIHI transferred its ownership interest in the Company, consisting of 100 shares of the Company’s common stock, to the Sponsor for no consideration. The per share price for the common stock was determined by dividing the amount initially contributed to the Company by the number of shares of common stock issued. On February 15, 2017, the Company completed a 71,875 to one stock split (the “Stock Split”) of its common stock and, as a result, 7,187,500 shares of the Company’s common stock were outstanding (the “Founder Shares”). The Sponsor subsequently sold certain of such shares to certain of the Company’s officers and/or directors, and thereafter, the Sponsor surrendered 2,875,000 Founder Shares to the Company for no consideration. On May 11, 2017, the Company declared and paid to its stockholders a stock dividend (the “Stock Dividend”) of approximately 0.20475 shares for each share then held. All of the stockholders other than the Sponsor surrendered to the Company for no consideration the shares of common stock received by them in the Stock Dividend. As a result thereof, the total number of Founder Shares outstanding increased from 4,312,500 to 5,175,000 and the number of Founder Shares held by the Sponsor increased from 4,212,500 to 5,075,000.

The holders of the Founder Shares have agreed not to transfer, assign or sell any of their Founder Shares (except to certain permitted transferees) until the earlier of one year after the completion of a Business Combination or earlier if, subsequent to a Business Combination, (i) the last reported closing price of the common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (ii) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property subject to certain limited exceptions (the “Lock-Up Period”).

Promissory Note — Related Party

In connection with the Company’s special meeting of stockholders held on February 8, 2019, the Sponsor agreed to contribute to the Company as a loan $0.0333 for each Public Share that did not redeem in connection with the stockholder vote to approve the Charter Amendment for each month, or portion thereof, that is needed by the Company to complete a Business Combination from February 17, 2019 until the June 17, 2019 (the “Contribution”). The Contribution was conditional upon the approval of the Charter Amendment, which occurred on February 8, 2019. The Sponsor has not made, and does not intend to make, any additional contribution for any period after June 17, 2019.

On February 17, 2019, the Company executed and delivered to the Sponsor, a promissory note in the principal amount of up to $1,966,000 (the “Note”). The Note evidences the Company’s obligation to repay all loans to be made by the Sponsor pursuant to the Contribution, which aggregate amount will constitute the principal amount payable under the Note. The Note will not bear interest. The Sponsor may, at its option, convert each $1.00 outstanding under the Note into one warrant to purchase a share of common stock of the Company on the same terms and conditions as the Private Placement Warrants. As of June 30, 2019, the Company had $1,965,675 outstanding under the Note.

 

11


Table of Contents

MODERN MEDIA ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Related Party Loans

In order to finance potential transaction costs in connection with a Business Combination, (i) the Sponsor has committed to loan the Company up to an aggregate of $500,000 in the event that funds held outside of the Trust Account are insufficient to fund expenses relating to investigating and selecting a target business and other working capital requirements after the Initial Public Offering and prior to a Business Combination and (ii) the Sponsor, an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company any additional funds as may be required (“Working Capital Loans”), which will be repaid only upon the completion of a Business Combination. If the Company does not complete a Business Combination, the Company may use a portion of any funds held outside the Trust Account to repay the Working Capital Loans; however, no proceeds from the Trust Account may be used for such repayment. Up to $1,000,000 of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants with respect to exercise price, exercisability and exercise period, except as provided in the Company’s registration statement filed in connection with the Initial Public Offering. As of June 30, 2019, the Company had $30,000 outstanding under the Working Capital Loans.

6. COMMITMENTS AND CONTINGENCIES

Registration Rights

Pursuant to a registration rights agreement entered into on the Closing Date, the holders of the Founder Shares and Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, and their respective permitted transferees (and any shares of common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any) are entitled to registration rights. The holders of these securities are entitled to make up to three demands, in the case of the Founder Shares and the Private Placement Warrants (and any shares of common stock issuable upon the exercise of the Private Placement Warrants), excluding short form demands, and one demand, in the case of the warrants that may be issued upon the conversion of Working Capital Loans (and any shares of common stock issuable upon the exercise of such warrants), that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to other registration statements filed by the Company and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of any applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Deferred Underwriting Commission

The underwriters are entitled to a deferred fee of $0.38 per Unit, or $7,785,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.

In connection with the pending business combination with Akazoo, the underwriters have waived their right to receive $3,000,000 of their deferred fee which had been held in the Trust Account. Accordingly, as of June 30, 2019, the underwriters are now entitled to receive up to an aggregate amount of $4,785,000 of deferred fees. The Company recorded the waiver of the deferred fee as a credit to additional paid in capital in the accompanying statement of stockholders’ equity.

Right of First Refusal

The Company granted Macquarie Capital (USA) Inc., an affiliate of the Sponsor and an underwriter of the Initial Public Offering, a right of first refusal for a specified period from the closing date of the Initial Public Offering to provide to the Company certain financial advisory, underwriting, capital raising, and other services for which they may receive fees. The actual amount of fees to be paid will vary significantly based on the size of any transaction and the extent to which other investment banks are involved.

Deferred Legal Fees

The Company is obligated to pay deferred legal fees of $300,000 upon the consummation of a Business Combination for services performed in connection with the Initial Public Offering. If no Business Combination is consummated, the Company will not be obligated to pay such fees.

 

12


Table of Contents

MODERN MEDIA ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Akazoo Business Combination

On January 24, 2019, the Company, Akazoo, Apostolos N. Zervos (“Mr. Zervos”), acting in accordance with article 100-17 of the Luxembourg Company Act, on behalf and in the name of Unlimited Music S.A., a Luxembourg public limited company ( société anonyme ) (“LuxCo”), and Modern Media LLC, a Georgia limited liability company acting in accordance with article 100-17 of the Luxembourg Company Act, on behalf and in the name of Modern Media Acquisition Corp. S.A., a Luxembourg public limited company ( société anonyme ) (“PubCo”), entered into a Business Transaction Agreement (the “Business Transaction Agreement”, with the transactions contemplated therein referred to as the “Transactions”). Pursuant to the Business Transaction Agreement, the Company and Akazoo agreed, subject to the terms and conditions of the Business Transaction Agreement, to effect a combination of their respective businesses (the “Akazoo Business Combination”). As described below in Note 9, Subsequent Events, on July 29, 2019, the Company, PubCo, Unlimited Music S.A., Akazoo and Macquarie Capital (USA) Inc. (solely for purposes of Section 13 to the agreement discussed below), entered into a Letter Agreement (the “Letter Agreement”) that, among other things, amended certain provisions of the Business Transaction Agreement to provide for the contemplated PIPE Financing (as defined below), which is expected to close immediately after the consummation of the Business Combination. The description of the Business Transaction Agreement below gives effect to the Letter Agreement.

The Akazoo Business Combination will be effected as follows: (i) in accordance with Luxembourg law and the Delaware General Corporation Law (the “DGCL”), the Company will merge with and into PubCo, with PubCo remaining as the surviving publicly traded entity (the “Merger”); (ii) no later than seven days prior to the effective date of the Merger, LuxCo will acquire the entire issued share capital of Akazoo by issuing LuxCo shares (“LuxCo Shares”) to the Akazoo shareholders (the “Share Exchange”), such that the shareholdings of LuxCo will be identical to that of Akazoo prior to the Share Exchange; and (iii) on the calendar day following the effective date of the Merger, LuxCo will merge with and into PubCo in accordance with Luxembourg law, with PubCo remaining as the surviving publicly traded entity (the “Luxembourg Merger”). Following the consummation of the Luxembourg Merger, Akazoo will be a direct, wholly owned subsidiary of PubCo, and the current security holders of the Company and Akazoo will be shareholders of PubCo.

Subject to the terms of the Business Transaction Agreement and at the consummation of the Merger, each share of the Company’s common stock will convert into the right to receive one PubCo ordinary share, and each warrant to purchase the Company’s common stock (each, a “Company Warrant”) will convert into a warrant to purchase an equal number of PubCo ordinary shares (each, a “PubCo Warrant”) on the same terms as the Company warrants. Also, as a result of the transactions, the holders of the Company’s currently outstanding rights to purchase the Company’s common stock will receive, with respect to each right, 0.1 PubCo ordinary shares.

Existing Akazoo shareholders will receive an aggregate number of PubCo ordinary shares equal to an assumed Akazoo enterprise value of $380 million (less any cash payment to them) divided by the per share redemption price applicable to any redemptions by public stockholders of the Company.

Additionally, subject to the terms of the Business Transaction Agreement, as consideration for the cancellation of their LuxCo Shares in exchange for PubCo ordinary shares in the Luxembourg Merger, (i) each issued and outstanding LuxCo Share will be cancelled, and (ii) each LuxCo shareholder will be entitled to receive its pro rata share of the Share Consideration (as defined in the Business Transaction Agreement).

The Business Transaction Agreement provides for customary conditions precedent to closing, including (i) approval by the Company’s stockholders of (A) the adoption of the Business Transaction Agreement and the transactions contemplated thereby pursuant to Section 251 of the DGCL, and (B) any other proposals the parties deem necessary or desirable to consummate the Akazoo Business Combination (collectively, the “Transaction Proposals”), in accordance with the rules and regulations of Nasdaq, the Company’s organizational documents and the DGCL, (ii) approval of the Transactions by the Akazoo shareholders in accordance with the laws of Scotland and Akazoo’s organizational documents, (iii) a registration statement on Form F-4 (or other appropriate form) pursuant to which the PubCo ordinary shares, PubCo Warrants and the PubCo ordinary shares issuable upon the exercise of such PubCo Warrants to be issued to the holders of Company Warrants pursuant to the Merger shall be registered for issuance under the Securities Act, having been declared effective by the SEC; (iv) the issuance of all necessary permits and authorizations under state securities or “blue sky” laws; (v) the funds contained in the Company’s Trust Account and any additional capital otherwise available to the Company being not less than $53,000,000; (vi) the PubCo ordinary shares having been approved for listing on Nasdaq and (vii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

As discussed above, the consummation of the Business Combination is conditioned upon there being not less than $53 million available between MMAC’s trust account and any additional capital otherwise available to MMAC at the time of consummation of the Business Combination, although such condition may be waived by Akazoo. As of June 30, 2019, MMAC had approximately $14.7 million in cash in its trust account. Given the amount currently in MMAC’s trust account, PubCo is in the process of securing binding commitments to purchase PubCo units, comprised of PubCo equity securities, in a private placement offering on terms agreed to by the parties to the Business Transaction Agreement (such private placement offering, the “PIPE Financing”). The parties anticipate that proceeds from the PIPE Financing, together with cash available in MMAC’s trust account, would provide PubCo with at least an aggregate of $53 million of available cash after consummation of the Business Combination and the offering, before payment of any fees and expenses. There is no guarantee that the PIPE Financing will be successful or that the other closing conditions under the Business Transaction Agreement will be satisfied or waived before September 17, 2019, the date on which MMAC must begin to liquidate its trust account pursuant to the Charter.

7. STOCKHOLDERS’ EQUITY

Preferred Stock — The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, rights and preferences as may be determined from time to time by the Company’s Board of Directors. At June 30, 2019 and March 31, 2019, there were no shares of preferred stock issued or outstanding.

 

13


Table of Contents

MODERN MEDIA ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Common Stock — The Company is authorized to issue 100,000,000 shares of common stock with a par value of $0.0001 per share. Holders of the Company’s common stock are entitled to one vote on each matter per share of common stock they hold. At June 30, 2019 and March 31, 2019, there were 6,577,232 and 6,409,478 shares of common stock issued and outstanding, respectively (excluding 4,433 and 13,522,841 shares, respectively, of common stock subject to possible redemption).

Rights — Each holder of a Public Right will receive one-tenth (1/10) of one share of common stock upon consummation of a Business Combination, even if the holder of such Public Right redeems all shares held by it in connection with a Business Combination. No fractional shares will be issued upon exchange of the Public Rights. No additional consideration will be required to be paid by a holder of Public Rights in order to receive its additional shares upon consummation of a Business Combination as the consideration related thereto has been included in the Unit purchase price paid by investors in the Initial Public Offering. If the Company enters into a definitive agreement for a Business Combination in which the Company will not be the surviving entity, the definitive agreement will provide for the holders of Public Rights to receive the same per share consideration the holders of the common stock will receive in the transaction on an as-converted into common stock basis and each holder of a Public Right will be required to affirmatively covert its Public Rights in order to receive 1/10 of one share underlying each Public Right (without paying additional consideration) upon the consummation of a Business Combination. The shares issuable upon exchange of the Public Rights will be freely tradable (except to the extent held by affiliates of the Company).

If the Company is unable to complete a Business Combination by the Combination Deadline and the Company liquidates the funds held in the Trust Account, holders of Public Rights will not receive any of such funds with respect to their Public Rights, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Rights, and the Public Rights will expire worthless. Further, there are no contractual penalties for failure to deliver securities to the holders of the Public Rights upon consummation of a Business Combination. Additionally, in no event will the Company be required to net cash settle the Public Rights. Accordingly, the Public Rights may expire worthless.

Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing date of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of common stock issuable upon exercise of the Public Warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. Notwithstanding the foregoing, if the Company’s common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under the Securities Act, the Company, at its option, may require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon the Company’s redemption or liquidation.

The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the shares of common stock issuable upon exercise of the Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Furthermore, the Private Placement Warrants will expire five years after the completion of a Business Combination or earlier upon the Company’s liquidation.

Additionally, the Private Placement Warrants are non-redeemable so long as they are held by the initial purchasers or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

The Company may redeem the Public Warrants (the “30-day redemption period”):

 

   

in whole and not in part;

 

   

at a price of $0.01 per warrant;

 

   

upon a minimum of 30 days’ prior written notice of redemption;

 

14


Table of Contents

MODERN MEDIA ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

   

if, and only if, the last reported closing price of the Company’s common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders; and

 

   

if, and only if, there is an effective registration statement in effect with respect to the shares of common stock underlying such warrants at the time of redemption and a current prospectus relating to those shares of common stock is available throughout the 30-day redemption period.

If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as is described in the warrant agreement.

The exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of common stock at a price below their exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.

8. FAIR VALUE MEASUREMENTS

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

 

Level 1:    Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2:    Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3:    Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at June 30, 2019 and March 31, 2019, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

Description    Level      June 30, 2019      March 31, 2019  

Assets:

        

Investments held in Trust Account

     1      $ 14,525,384      $ 152,420,927  

9. SUBSEQUENT EVENTS

On July 29, 2019, the Company, PubCo, Unlimited Music S.A., Akazoo and Macquarie Capital (USA) Inc. (solely for purposes of Section 13 to the agreement discussed below), entered into a Letter Agreement (the “Letter Agreement”) that, among other things, amended certain provisions of the Business Transaction Agreement to provide for the contemplated PIPE Financing (as defined below), which is expected to close immediately after the consummation of the Business Combination.

Pursuant to the Letter Agreement, the Business Transaction Agreement was amended to provide that consummation of the Business Combination is conditioned upon there being not less than $53 million of available cash between the Company’s trust account and any additional capital otherwise available to the Company at the time of consummation of the Business Combination, although such condition may be waived by Akazoo. Given the amount currently in the Company’s trust account, the Letter Agreement provides that, if received prior to August 16, 2019, any binding commitments to purchase PubCo Ordinary Shares (as defined below) in a private placement offering on terms agreed to by the parties to the Business Transaction Agreement (such private placement offering, the “PIPE Financing”) will be deemed additional capital otherwise available to the Company.

The Letter Agreement also provides that, upon consummation of the Business Combination, Modern Media Sponsor LLC will forfeit 2.6 million PubCo Ordinary Shares and will forfeit 7.32 million warrants to purchase PubCo Ordinary Shares (“PubCo Warrants”) upon consummation of the PIPE Financing; provided, that if gross proceeds from the PIPE Financing are such that PubCo will have an aggregate of $60 million of available cash after consummation of the Business Combination and PIPE Financing, instead of the 2.6 million PubCo Ordinary Shares originally agreed to be forfeited in the Letter Agreement, the sponsor would forfeit 2.35 million PubCo Ordinary Shares and, if PubCo will have an aggregate of $70 million of available cash after consummation of the Business Combination and PIPE Financing, instead of the 2.6 million PubCo Ordinary Shares originally agreed to be forfeited in the Letter Agreement, the sponsor would forfeit 2.1 million PubCo Ordinary Shares.

The Letter Agreement also provides that, upon consummation of the Business Combination, amounts owed by the Company to certain creditors will be converted into PubCo Ordinary Shares and that the amount of expenses payable by the Company contemplated in the Business Transaction Agreement will be modified on a sliding scale, depending on the amount of available cash that the Company has upon consummation of the Business Combination and PIPE Financing. In addition, the Letter Agreement provides that, depending on the amount of available cash that the Company has upon consummation of the Business Combination and PIPE Financing, certain PubCo Ordinary Shares sold in the PIPE Financing may include PubCo Ordinary Shares held by former shareholders of Akazoo. Furthermore, the Letter Agreement provides that a certain number of PubCo Warrants will be issued for no additional consideration to holders of PubCo Ordinary Shares that previously held Akazoo equity, equal to the difference between the total amount of PubCo Warrants forfeited by the sponsor and the total amount of PubCo Warrants issued to investors in the PIPE Financing as an incentive to participate in the PIPE Financing, subject to a minimum issuance of PubCo Warrants which decreases as the amount raised in the PIPE Financing increases.

The Letter Agreement also provides PubCo with the ability to offer, for no additional consideration and as an incentive to certain investors purchasing PubCo Ordinary Shares in the PIPE Financing, up to an aggregate number of PubCo Ordinary Shares and PubCo Warrants corresponding to the number of PubCo Ordinary Shares and PubCo Warrants forfeited by the sponsor as described above.

The Letter Agreement also amends the form of Shareholders’ Agreement between PubCo and certain significant shareholders of PubCo, to be entered into upon consummation of the Business Combination. As amended, the form of Shareholders’ Agreement provides that (i) the rights of MIHI LLC and Modern Media Sponsor LLC to designate an observer to the PubCo Board of Directors will terminate upon expiration of those shareholders’ respective lock-up periods under their separate lock-up agreements to be entered into upon consummation of the Business Combination and (ii) after execution of the Shareholders’ Agreement, Mr. Lewis W. Dickey, Jr. will serve as the non-executive chairman of the PubCo Board of Directors for a period of one year and will serve as a member of the PubCo Board of Directors for a period of three years, receiving an annual fee of $330,000 in each of the three years he serves on the PubCo Board of Directors.

 

15


Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements and the notes related thereto contained elsewhere herein, and with our audited financial statements and the notes related thereto which are included in our Annual Report on Form 10-K for the year ended March 31, 2019.

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our expected financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of our Annual Report on Form 10-K for the year ended March 31, 2019 filed with the U.S. Securities and Exchange Commission (the “SEC”). Our securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

We are a Delaware corporation formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, recapitalization or other similar business combination with one or more businesses. We have reviewed, and continue to review, a number of opportunities to enter into an initial business combination with an operating business, but we are not able to determine at this time whether we will complete a business combination with any of the target businesses that we have reviewed or with any other target business. We intend to effectuate our initial business combination using cash from the proceeds of the Initial Public Offering and the sale of the private placement warrants, our capital stock, debt or a combination of cash, stock and debt.

The issuance of additional shares of our common stock in a business combination:

 

   

may significantly dilute the equity interest of current investors;

 

   

may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock;

 

   

could cause a change of control if a substantial number of shares of our common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;

 

   

may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and

 

   

may adversely affect prevailing market prices for shares of our common stock and/or warrants.

Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in:

 

   

default and foreclosure on our assets if our operating revenues after our initial business combination are insufficient to repay our debt obligations;

 

   

acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;

 

   

our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand;

 

   

our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt security is outstanding;

 

16


Table of Contents
   

using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;

 

   

limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;

 

   

increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and

 

   

limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.

Recent Developments

Under our Charter, we had until November 17, 2018 (the “Initial Date”) to complete a Business Combination, or February 17, 2019 if we executed a letter of intent, agreement in principle or definitive agreement for a Business Combination by the Initial Date but had not completed a Business Combination by such date. Effective October 31, 2018, we signed a non-binding letter of intent with respect to the Akazoo Business Combination. As a result, we had until February 17, 2019 to consummate our business combination.

On January 24, 2019, we entered into the Business Transaction Agreement by and among the Company, Akazoo, Mr. Zervos, LuxCo and PubCo.

On February 8, 2019, we held a meeting of our stockholders at which the stockholders approved, among other things, an amendment (the “First Charter Amendment”) to our Charter to extend the deadline to complete a Business Combination from February 17, 2019 to June 17, 2019. In connection with the First Charter Amendment, the Sponsor agreed to provide the Contribution, in the form of a loan. In connection with the approval of the First Charter Amendment, stockholders elected to redeem an aggregate of 5,942,681 shares of the Company’s common stock. Following the completion of such redemptions, the Company had 19,932,319 shares of common stock issued and outstanding.

On June 14, 2019, the Company held a special meeting of the stockholders at which the stockholders approved, among other things, a proposal to amend (the “Second Charter Amendment”) the Company’s Charter to extend the deadline to complete a Business Combination from June 17, 2019 to September 17, 2019 (the “Combination Deadline”). In connection with the approval of the Second Charter Amendment, stockholders elected to redeem an aggregate of 13,350,654 shares of the Company’s common stock. Following the completion of such redemptions, as of June 30, 2019, the Company had approximately $14.5 million in cash remaining in the trust account and 6,581,665 shares of common stock issued and outstanding. The Company intends to obtain additional capital to supplement the amounts that will be available in the trust account from one or more financing arrangements that would be entered into concurrently with completion of the Akazoo Business Combination.

If the Company does not consummate the pending Akazoo Business Combination, or any other business combination, on or before the Combination Deadline, and that date is not otherwise extended by the Company’s stockholders, the Company would be required to distribute the proceeds held in trust to its stockholders in accordance with the Charter.

Results of Operations

As of June 30, 2019, we had neither engaged in any operations nor generated any revenues. We will not generate any operating revenues until after completion of our initial business combination. We will continue to generate non-operating income in the form of interest income on marketable securities held in the trust account.

For the three months ended June 30, 2019, we had net income of $173,176, which consisted of interest income on marketable securities held in the trust account of $870,220, offset by operating costs of $510,846, and a provision for income taxes of $186,198.

For the three months ended June 30, 2018, we had net income of $479,497, which consisted of interest income on marketable securities held in the trust account of $802,262, offset by operating costs of $164,711 and a provision for income taxes of $158,054.

We are incurring increased expenses for due diligence expenses in connection with the evaluation of a potential initial business combination.

Liquidity and Capital Resources

As of June 30, 2019, we had investments held in the Trust Account of $14,525,384 (including approximately $131,000 of interest income) consisting of money market funds. Interest income on the balance in the Trust Account may be used by us to pay taxes, and to pay up to $50,000 of any dissolution expenses. Through June 30, 2019, we had withdrawn approximately $1,560,000 of interest earned on the trust account balance for taxes, of which approximately $81,000 was withdrawn during the three months ended June 30, 2019. In connection with the approval of the First Charter Amendment in February 2019, and pursuant to the terms of the Charter, stockholders elected to

 

17


Table of Contents

redeem an aggregate of 5,942,681 shares of the Company’s Common Stock. On June 14, 2019, the Second Charter Amendment was approved and stockholders elected to redeem an aggregate of 13,350,654 shares of the Company’s Common Stock. Following the completion of such redemptions, as of June 30, 2019, the Company had approximately $14.5 million in cash remaining in the trust account and 6,581,665 shares of common stock issued and outstanding.

In connection with the pending business combination with Akazoo, the underwriters have waived their right to receive $3,000,000 of their deferred fee which had been held in the trust account. Accordingly, as of June 30, 2019, the underwriters are now entitled to receive up to an aggregate amount of $4,785,000 of deferred fees.

For the three months ended June 30, 2019, cash used in operating activities was $217,488. Net income of $173,176 was offset by interest earned on marketable securities held in the trust account of $870,220, which is excluded from operations. Changes in operating assets and liabilities provided $479,556 of cash from operating activities.

For the three months ended June 30, 2018, cash used in operating activities was $167,788. Net income of $479,497 was impacted by interest earned on cash and marketable securities held in the trust account of $802,262, which is excluded from operations. Changes in operating assets and liabilities provided $154,977 of cash from operating activities.

We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (which interest shall be net of taxes payable), excluding the deferred underwriting commissions, to complete our initial business combination. Prior thereto, we may withdraw interest from the trust account only to pay taxes. Through June 30, 2019, we had withdrawn approximately $1,560,000 of interest earned on the trust account balance for taxes, of which $81,200 was withdrawn during the three months ended June 30, 2019. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account. We expect the interest earned on the amounts in the trust account will be sufficient to pay our taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies. The Company intends to obtain additional capital to supplement the amounts that will be available in the trust account from one or more financing arrangements that would be entered into concurrently with the completion of the Akazoo Business Combination.

We can use a portion of the funds not placed in the trust account to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we enter into an agreement where we pay for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific business combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.

The Company has until September 17, 2019 to complete an initial business combination. If the Company is unable to complete an initial business combination by September 17, 2019, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, and subject to having lawfully available funds therefor, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the trust account deposits (which interest shall be net of taxes payable and less up to $50,000 to pay dissolution expenses), divided by the number of then-outstanding public shares, which redemption will completely extinguish the public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

The underwriters have agreed to waive their rights to their deferred underwriting commissions held in the trust account in the event the Company does not complete an initial business combination by September 17, 2019 and, in such event, such amounts will be included with the funds held in the trust account that will be available to fund the redemption of the public shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution (including the trust account assets) will be only $10.23 at June 30, 2019.

 

18


Table of Contents

Going Concern

As of June 30, 2019, we had approximately $9,000 in our operating bank account, approximately $131,000 of interest available to pay our franchise and income taxes (less up to $50,000 of interest to pay dissolution expenses) and working capital deficit of approximately $4,395,000.

If our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating our initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination.

In order to finance transaction costs in connection with an intended initial business combination, (i) our sponsor has committed to loan us up to an aggregate of $500,000, to be provided to us in the event that funds held outside of the trust account are insufficient to fund our expenses relating to investigating and selecting a target business and other working capital requirements prior to our initial business combination and (ii) our sponsor, one or more affiliates of our sponsor or certain of our officers or directors may, but are not obligated to, loan us any additional funds as may be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay any such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,000,000 of such loans may be convertible into working capital loan warrants of the post business combination entity at a price of $1.00 per warrant at the option of the lender. The working capital loan warrants will be identical to the private placement warrants issued to our sponsor, including as to exercise price, exercisability and exercise period except that, (i) such warrants would not be exercisable more than five years from the closing date of the Initial Public Offering and (ii) pursuant to FINRA Rule 5110(g)(1), such warrants, and the shares of common stock issuable upon exercise of such warrants, shall be subject to certain additional restrictions on transfer. Other than as set forth above, the terms of such loans by our sponsor, an affiliate of our sponsor or certain of our officers or directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our sponsor, an affiliate of our sponsor or certain of our officers or directors, if any, as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account. As of June 30, 2019, there was $30,000 outstanding of borrowings under the working capital loans.

However, the Company intends to obtain additional capital from the PIPE Financing to supplement the amounts that will be available in the trust account in order to satisfy the closing condition in the Business Transaction Agreement that the Company have at least $53 million of available cash at the time of the Akazoo Business Combination.

If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, suspending the pursuit of a potential transaction. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. These conditions raise substantial doubt about our ability to continue as a going concern through the Combination Deadline, which is currently scheduled for September 17, 2019.

Off-Balance Sheet Arrangements; Commitments and Contractual Obligations

As of June 30, 2019, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.

The underwriters were paid a cash underwriting discount of $0.20 per Unit, or $3,600,000 in the aggregate, upon the closing of the Initial Public Offering. In addition, the underwriters may be entitled to a deferred fee of $0.38 per Unit, or $7,785,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the trust account solely in the event that the Company completes an initial business combination, subject to the terms of the underwriting agreement.

In connection with the pending business combination with Akazoo, the underwriters have waived their right to receive $3,000,000 of their deferred fee which had been held in the trust account. Accordingly, as of June 30, 2019, the underwriters are now entitled to receive up to an aggregate amount of $4,785,000 of deferred fees.

The Company is obligated to pay deferred legal fees of $300,000 upon the consummation of an initial business combination for services performed in connection with the Initial Public Offering. If no business combination is consummated, the Company will not be obligated to pay such fee.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. The Company has not identified any critical accounting policies.

 

19


Table of Contents

Recent accounting pronouncements

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange rates, commodity prices and/or equity prices. Our business activities through June 30, 2019 consisted solely of organizational activities, preparation activities relating to our Initial Public Offering and reviews of opportunities to enter into an initial business combination.

In connection with our Initial Public Offering, the funds held in the trust account have been invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less, or in an open-ended investment company that holds itself out as a money market fund meeting certain conditions under Rule 2a-7 of the Investment Company Act. Due to the short-term nature of these investments, we believe there is no associated material exposure to interest rate risk.

We have not engaged in any hedging activities since our inception. We do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules, regulations and related forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applies its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives. The Company’s management, including the Chief Executive Officer and the Chief Financial Officer, does not expect that our disclosure controls and procedures can prevent all possible errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. There are inherent limitations in all control systems, including the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of one or more persons. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and, while our disclosure controls and procedures are designed to be effective under circumstances where they should reasonably be expected to operate effectively, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in any control system, misstatements due to possible errors or fraud may occur and not be detected.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2019. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2019, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

During the most recently completed fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

20


Table of Contents

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There is no material litigation, arbitration or governmental proceeding currently pending or, to our knowledge, threatened against us or any members of our management team in their capacity as such.

ITEM 1A. RISK FACTORS

Please refer to Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended March 31, 2019 for information regarding known material risks that could affect our business, results of operations, financial condition and liquidity. These known risks have not changed materially. In addition to these risks, other risks that we presently do not consider material, or other unknown risks, could materially adversely impact our business, financial condition and results of operations in future periods.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

 

Exhibit
No.

  

Description

  31.1    Certificate of the Principal Executive Officer (Rule 13a-14a)
  31.2    Certificate of the Principal Financial Officer (Rule 13a-14a)
  32.1    Certificate of Principal Executive Officer (Section 1350)
  32.2    Certificate of Principal Financial Officer (Section 135 0)
101.INS    XBRL Instance Document
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
101.SCH    XBRL Taxonomy Extension Schema Document
101.DEF    XBRL Taxonomy Extension Definition Linkbase Document
101.LAB    XBRL Taxonomy Extension Labels Linkbase Document
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document

 

21


Table of Contents

SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    MODERN MEDIA ACQUISITION CORP.
August 9, 2019     By:  

/s/ Lewis W. Dickey, Jr.

      Name:   Lewis W. Dickey, Jr.
      Title:  

President and Chief Executive Officer

(Principal Executive Officer)

August 9, 2019     By:  

/s/ William Drewry

      Name:   William Drewry
      Title:  

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 

22